ESR AR 2019 EN

Based on our observation since the outbreak of the pandemic, COVID-19 has accelerated the structural change in consumers’ buying habits and retailers’ supply chain management, and these changes can be long term. Many retailers and suppliers are now looking to modernise and improve their logistics facilities and capabilities in response to supply chain challenges arising from surging orders and transportation disruptions. Despite a challenging macro environment in the near term, we expect these structural trends will reinforce the resiliency of logistics real estate, boosting demand from investors during this period and beyond. In the long run, ESR remains confident that logistics real estate in the Asia Pacific will continue to offer what we believe to be the world’s best secular growth opportunities, propelled by the continuous positive trends of e-commerce, urbanisation, economic growth and domestic consumption in the region. Among those positive trends, e-commerce continues to be a major factor driving the logistics sector and we are confident that there is a long runway for growth. Demand for institutional grade logistics space, in particular from e-commerce companies and 3PL providers, continues on its upward trajectory in meeting the surge in last-mile delivery demand as well as the structural shift towards online consumption. In most markets across Asia Pacific, there has been a significant undersupply of modern logistics space. Modern logistics in Asia Pacific as a proportion of total logistics space is relatively low compared to the United States. For example, it is estimated that only 5% to 7% of the total logistics facilities in China and Japan consist of modern logistics facilities for lease. While we have identified a compelling opportunity, each of our six markets naturally contends with its own, unique landscapes, opportunities and challenges. Japan, for example, is typically viewed as a mature market where returns and growth are relatively low. However, the logistics real estate sector turns that view on its head. Lagging behind its neighbours in e-commerce despite its advanced technology, Japan has huge capital values especially for operators with the right assets and strategies. India, being an early growth market, is seeing an increasing number of international providers and investors eager to get a foothold in the country. It is looking forward to rapid growth in both scale and standards driven by a confluence of factors including e-commerce and urbanisation as well as government policies and infrastructure development. The sheer size and potential of the Indian market will likely see the country emerge as a new growth leader in the region. Leveraging our regional network and local capabilities, ESR has built a platform designed to thrive across these markets. ESR is one of the very few experienced, scalable providers with wide exposure in various geographies and products in the Asia Pacific market today. As such, our network and portfolio accommodate and cater to investors and customers with various strategies, serving as a single platform for them to tap into opportunities across the region. 15 Greenwich Drive, Singapore 20 Focused